Ace smallcap investor Porinju ‘baffled’ by erosion in his midcap portfolio; says, stocks will bounce back

“To be very frank, I’m a little baffled this time looking at the extent of erosion in portfolio value in such a short period,” Porinju Veliyath said.

The vicious sell-off in small and midcap stocks has left even ace investor Porinju Veliyath’s pet stocks yielding poorly leading to an under-performing in his PMS portfolio. “We are going through a underperformance in PMS since January this year. An unusual sell-off in mid and small cap stocks is going on leading to irrational pricing of many of our portfolio stocks,” ace investor CEO of Equity Intelligence, Porinju Veliyath wrote in a letter to investors yesterday.

Notably, he observed that in the last 15 years the midcap stocks have outperformed the indices significantly, despite such pockets of under-performance. “To be very frank, I’m a little baffled this time looking at the extent of erosion in portfolio value in such a short period,” he said.

However, the ace investor is comfortable looking at the values of the stocks, rather than the prices seen today, he added. So is he selling off a few stocks? “We will do some re-structuring, as required in a more rational market,” he wrote adding that he expects a significant bounce back in value stocks.

In a note to FE Online,V. K. Sharma, Head – PCG and Capital Market Strategy, HDFC Securities said that midcap stocks have been beaten down due to a recent SEBI classification. “Mid-cap stocks, which have been beaten down because of the SEBI classification related selling by the mutual funds should start doing better from June, once that selling will abate. We are advising investors to invest in the life insurance sector companies, asset management companies, housing and the FMCG sector,” he said.

Given the macro concerns including higher oil prices, weakening rupee, rising geopolitical tensions and political risk in India, experts are advising investors to exercise caution in the stock market. Rahul Sharma, Senior Research Analyst at Equity99 said, “Investors are advised to remain cautious and watch for any developments closely in the current volatile market. Keep watch on companies that will be announcing their quarterly financial results. Have a stock specific approach, buy on dips.”